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We previously blogged about the NLRB’s relatively shocking September 2012 decision in Finley Hospital (359 NLRB No. 9), in which the Board held that an employer was required to continue providing wage increases after the expiration of an applicable collective bargaining agreement. On June 3, 2015, after the employer filed a petition for review and the case had been remanded to the Board due to the Supreme Court’s decision in Noel Canning, the Board affirmed its previous decision (362 NLRB No. 102).

Procedural Background

After the Board issued its decision in September 2012, the employer filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit. While the petition was pending, the Supreme Court handed down its decision in NLRB v. Noel Canning, 134 S. Ct. 2550 (2014), which held that President Obama’s recess appointments to the NLRB were unconstitutional. Because at the time of the Board’s decision in Finley Hospital the Board included two persons whose appointments were found unconstitutional, the D.C. Circuit vacated the Board’s decision and order and remanded the case to the Board for further proceedings consistent with the Supreme Court’s decision.

The Board’s Reasoning

The Board in Finley Hospital II agreed with the Board’s rationale in Finley Hospital I and held that the employer violated the Act by unilaterally discontinuing the annual 3-percent pay raises provided for in the parties’ CBA after the CBA had expired and while the parties were negotiating for a successor CBA. As part of the remedy, the Board ordered the employer to make the employees whole for any losses sustained as a result of the unlawful change, plus interest compounded on a daily basis.

In finding a violation, the Board reasoned that the CBA’s language, which stated “[f]or the duration of this Agreement, the Hospital will adjust the pay of Nurses on his/her anniversary date” in the amount of three percent, did not establish a “clear and unmistakable waiver of the Union’s statutory right to bargain over the posttermination cessation of pay raises.” The Board noted that there is a distinction between an employer’s contractual obligation to maintain a particular term and condition of employment post-contract expiration and the employer’s statutory obligation to do so, and that even when a contractual right does not survive the expiration of an agreement, the statutory right typically does. The Board also noted that language in a collective bargaining agreement can intentionally preclude a provision from having any contractual force after the expiration of the agreement, but given the employer’s statutory duty to maintain the status quo post-contract expiration, such language will not permit a unilateral change of a term established by the same agreement unless it amounts to a clear and unmistakable waiver of the union’s separate statutory right to maintenance of the status quo.

The Board found that the inclusion of the language “for the duration of this Agreement” was not enough, reasoning that the contract provision at issue did not address any post-expiration conduct of the employer. Thus, to have constituted a clear and unmistakable waiver, the provision should have included language along the following lines: “upon expiration of the collective bargaining agreement, the employer’s obligation to provide pay increases shall terminate.”

Member Johnson’s Dissent

In his dissent, Member Johnson observed that by effectively deleting the time constraint that was an inherent part of the wage increase obligation contained in the CBA, the Board made a time-bound obligation (“during the term of this Agreement”) into a perpetual one. Member Johnson lamented that it was incongruous for the Board to believe that the employer’s 1-year commitment in the parties’ initial CBA to give each nurse a single wage increase had morphed into a statutory obligation to maintain a “status quo” of change.

Concluding Thoughts

In light of this pair of decisions, in order to avoid having to continue wage increases beyond the expiration of a CBA, employers must be extremely careful to include language in the CBA that will be sufficient to constitute a clear and unmistakable waiver of the statutory obligation to maintain the status quo with respect to wage increases. In other words, as Member Johnson noted in his dissent, “employers must now bargain with unions for what they can only hope will be ironclad language expressly providing that no increases will be paid beyond a contract term.”

Compare jurisdictions: Employment & Labor: North America

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